Money to invest - pay mortgage off???

[wouldbwelder]

My friend has been left some money in her aunt's will - about £150,000. what would be the best way to invest such a sum? She has a mortgage of about half that with 12 or so years to run - would it be better to pay that off completely for peace of mind purposes or is there a much better way to invest this money?

Nothing too risky please ... dot coms etc :hehe:

Thanks

WBW

[up-the-dubs]

Buy a foregin property where the market is still growing at double digit growth per year.

[s2k_vixen]

Buy another property (or two) to rent out. With that kind of deposit she'd get a good return and have a pension at the end

[timmy30]

wouldbwelder said:

My friend has been left some money in her aunt's will - about £150,000. what would be the best way to invest such a sum? She has a mortgage of about half that with 12 or so years to run - would it be better to pay that off completely for peace of mind purposes or is there a much better way to invest this money? Nothing too risky please ... dot coms etc Thanks WBW

Lucky her! Paying off debts ( including mortgage debt ) is a good way to start as she's having to pay interest on that out of post tax income.

With £75k remaining to invest it would be worth her paying to have a couple of sessions with an IFA, as her age, risk attitude, investment horizon, etc need to be taken into account before deciding what the best investments are for her.

[rich1231]

any chance of you swindling it out of them?

[vixpy1]

I would pay off the mortgage, and then stick the rest on the stock market!

[timmy30]

vixpy1 said:

I would pay off the mortgage, and then stick the rest on the stock market!

Ah but which one, that's the trick of it

[wouldbwelder]

She has a pension (she's 40ish) but it's with Equitable Life so not worth a lot at the mo .... is it worth her taking advantage of this SIPPs pension thingy from next April re second homes - don't know the ins and outs myself.

Read in the Sunday Express you can buy a classic car and stick it in your pension portfolio ... is this true?

Can you still drive the bugger tho!

[timmy30]

wouldbwelder said:

She has a pension (she's 40ish) but it's with Equitable Life so not worth a lot at the mo .... is it worth her taking advantage of this SIPPs pension thingy from next April re second homes - don't know the ins and outs myself. Read in the Sunday Express you can buy a classic car and stick it in your pension portfolio ... is this true? Can you still drive the bugger tho!

Tell her to go and see an IFA, oh and when Gordon Brown comes to you proferring gifts be very very very sceptical of his motives.

[Incorrigible]

Re the mortgage, there are deals that are charging well under 5% ATM and there a re savings accounts paying 8%

I'm sure someone will tell me that I'm missing something but rather than pay the mortgage off put the mortgage balance into a high earning savings account and spend the extra £3k a year on sweets

[Incorrigible]

anonymous said:

[redacted]

Still make more money than just paying the mortgage off though

>> I've just got a 4.5% (IIRC) mortgage fixed for 2 years

>> Edited by Incorrigible on Monday 10th October 11:37

[timmy30]

Incorrigible said:

Re the mortgage, there are deals that are charging well under 5% ATM and there a re savings accounts paying 8% I'm sure someone will tell me that I'm missing something but rather than pay the mortgage off put the mortgage balance into a high earning savings account and spend the extra £3k a year on sweets

Remember to deduct 20% tax off that 8% interest, so she'll receive just over 6 1/4 % versus paying 5%. Okay so you have a 1 1/4% spread. Not much.

And I am not in anyway disputing the mortgage rate that you have seen, BUT there must be hidden charges or it applies to a limited period only as banks generally do want to make so money out of lending money........

[simpo two]

timmy30 said:

it would be worth her paying to have a couple of sessions with an IFA, as her age, risk attitude, investment horizon, etc need to be taken into account before deciding what the best investments are for her.

Yes. It's a personal thing; she may not want to be responsible for a house in Bulgaria.
If she wants to keep the money in this country, then considering UK equities are doing well a stockbroker might be the answer. As it happens, he's just left here! So if you want a recommendation, please mail me.

[wouldbwelder]

So are we saying there's deals to be had out there whereby she may be better off not paying off the m/gage in one go? Her payments are about £700 a month - that's £75,000ish over 12 and a bit years I think - don't know the int rate she is paying.

Lot of pi55ing about though isn't it - how much is she likely to actually save - thousands?

I've said maybe pay the mortgage off but what do I know.

[timmy30]

wouldbwelder said:

So are we saying there's deals to be had out there whereby she may be better off not paying off the m/gage in one go? Her payments are about £700 a month - that's £75,000ish over 12 and a bit years I think - don't know the int rate she is paying. Lot of pi55ing about though isn't it - how much is she likely to actually save - thousands? I've said maybe pay the mortgage off but what do I know.

I'm rather sceptical about the idea that banks are currently charging less interest on money they lend than they are paying on despoits.

[srebbe64]

No brainer - pay off the mortgage!

[Incorrigible]

timmy30 said:

I'm rather sceptical about the idea that banks are currently charging less interest on money they lend than they are paying on despoits.

I agree, I guess the situation is that very few people have absolutely no debt, hence this person being able to use such offers to great effect

Srebbe, rather than giving one bank £75k you just give it to another and end up quids in, possibly not by much but maybe there's a few grand to be made by doinf nothing more than filling in a few forms

And if they change the rates at any point then you can pay the mortgage off anyway

Just asking, I'm not an IFA

[timmy30]

Incorrigible said:

timmy30 said: I'm rather sceptical about the idea that banks are currently charging less interest on money they lend than they are paying on despoits. I agree, I guess the situation is that very few people have absolutely no debt, hence this person being able to use such offers to great effect Srebbe, rather than giving one bank £75k you just give it to another and end up quids in, possibly not by much but maybe there's a few grand to be made by doinf nothing more than filling in a few forms And if they change the rates at any point then you can pay the mortgage off anyway Just asking, I'm not an IFA

fair enough.

I suppose it comes down to personal preference, in this case hers.

What is nice is that if you don't have a mortgage to pay you remove one of, if not the, largest monthly outgoing from your budget which gives one a great deal more piece of mind.

I know that generally the first investing tip alot of IFAs give though is first pay off all of your debts and then start to think about investments.

Oh and btw, there is a reason I said PAY to see an IFA, it's worth spending a couple of hundred quid (tops) to get someone who isn't working for a commission. So I'd avoid the free or very low fee IFAs.

[Rob_T]

she has £150k
her mortgage is approx £75k

on an assumption that she is risk adverse i would do the following:

buy a property to let for upto £150 that rents out for £600 per month (plenty of them around). post letting agents fees and VAT leaves approx 530 per month. if she takes that as income (assume 40% tax payer) takes home £320 per month. She should switch her mortgage to interest only (can get deals of around 5% at the mo) meaning her monthly mortgage is approx £310 per month.

ie effectively she has paid off her mortgage.

assume house prices rise 2% per year over the next 12 years (that's a nice conservative figure), her 150k house will be worth £190k.

12 years time she can sell the rental house, pay off her mortgage and have an extra (at least) £40k (pre tax) to play with.

if she was not risk adverse, i would leverage at least 3:1 on further property investment / rennovation. forget what anyone says, there's still shed loads to be made in property.

or speculate on the stock market. good time to buy if you do your research. hot tip... Parity (PTY stock symbol). I own 2.3m shares, so i've put my money where my mouth is.

[cotty]

If she changed her 75k mortgage to a one account and deposited 75K in it as well, would this turn her mortgage into interest free. ??

Im not suggesting she does this I just wondered if this is how it worked